Sonida Senior Living Inc (SNDA) 2018 Q1 法說會逐字稿

Good day, and welcome to the Capital Senior Living First Quarter 2018 Earnings Release Conference Call. Today's conference is being recorded.

The forward-looking statements in this release are subject to certain risks and uncertainties that could cause results to differ materially, including, but not without limitation to, the company's ability to find suitable acquisition properties at favorable terms; financing; licensing; business conditions; risk of downturns in economic conditions, generally; satisfaction of closing conditions, such as those pertaining to licensure; availability of insurance at commercially reasonable rates and changes in accounting principles and interpretations, among others; the other risks and factors identified from time to time in our reports filed with the Securities and Exchange Commission.

At this time, I would like to turn the conference over to Mr. Larry Cohen. Please go ahead.

Thank you. Good afternoon, and welcome to Capital Senior Living's First Quarter 2018 Earnings Call.

In the first quarter, we continued to take action to improve all aspects of our business including leveraging our operational scale to reduce costs, increase cash flow from operations and drive sustainable growth. As we maintain a culture of high reliability, accountability and operational excellence, we also continued to make excellent progress against our strategic plan. Despite the effect of seasonal attrition on occupancy, we saw year-over-year growth in same-community revenue and net operating income, and our cash flow from operations exceeded our internal projections.

By building on our 2017 cost control initiatives with further improvements in the first quarter, we have lower-than-anticipated expenses. Brett and Carey will discuss these initiatives as well as our 2018 cost initiatives, which are expected to have greater impact throughout the year.

Consistent with our goals from last quarter, we remain committed to improving our operational and financial performance. We are reaffirming our full year 2018 guidance and we remain focused on executing our comprehensive strategy to deliver higher revenues, enhanced cash flow and maximize the value of our owned real estate. With that, let's turn to some operational highlights from the quarter.

As expected, high seasonal attrition decreased same-community occupancy 100 basis points sequentially from the fourth quarter. We continue to be particularly pleased that the proactive systems and protocols we implemented to combat the severe flu season greatly minimized its spread throughout our communities. Our flu protocols kept our residents healthier and allowed our communities to continue touring and leasing during the severe and extended flu season. With the implementation of new sales and marketing initiatives, we achieved the highest number of first quarter move-ins in the history of the company, and ended the quarter with the lowest amount of first quarter occupancy loss over the past 3 years.

Our net quarterly loss of 84 units was better than we projected and considerably better than the quarterly occupancy loss of 216 units during the first quarter of 2017. As a result, we end the first quarter in a better position from an occupancy standpoint that we have been in the past 3 years and are projecting occupancy growth for the full year 2018.

We also saw an increase in same-community average monthly rent of 1.7% compared to the first quarter of 2017. Rate growth would have been higher but for some onetime short-term concessions offered during the quarter. These concessions burned off in March and we expect annual rate growth to return to around 3% in future quarters.

As always, we are focused on driving efficiencies and maintaining a durable cost structure. To that end, we maintain the lower expense base that we achieved in the last couple of quarters with same-community operating expenses increasing only 1% from the first quarter of the prior year. The combination of improved pricing and our cost initiatives resulted in approximately a 1% improvement in same-community net operating income compared to the first quarter of 2017.

I am also pleased that March was the seventh consecutive month that we achieved year-over-year growth in same-store net operating income.

We're also expanding our talent. Our people are our most important asset and their engagement and development are critical to continuing to serve our residents well and to helping us achieve optimal operating and financial performance. During the first quarter, we hired Jeremy Falke in the newly created role of Senior Vice President of Human Resources. Jeremy's breadth of experience in the various disciplines of human resources notably, within the health care industry, enables him to make significant contributions to the future development of our organization.

We also added a Vice President of Sales and Business Development and are looking forward to a Vice President of Operations join us next week. These new positions will provide additional strategic oversight to our sales and operations organizations. Both individuals possess outstanding backgrounds academically and professionally and are expected to be immediately impactful in driving improvements in our operating and financial results.

As we discussed last quarter, we are well positioned to profit from expected stronger economic growth and improved consumer confidence. Our residents, most of whom live on fixed income, benefit from higher interest rates. Higher interest rates also constrain new supply. So we would expect to benefit from increases in occupancy and higher monthly rates driving more robust organic growth. This growth is expected to be further supported by near-term demographic growth and expected increases in penetration rates.

As one of the largest senior housing owners by percentage of ownership, we enjoy a number of advantages including the value derived from our owned real estate and the ability to capture the full benefit from our operations.

We also benefit from financing our owned real estate with attractive nonrecourse fixed-rate mortgages with low interest rates and strong coverage ratios. This positive leverage would magnify our performance in a stronger economy.

Let me just summarize before handing the call over to Brett. We made broad-based organizational and operational changes in 2017 to refocus our company-wide culture of high reliability, accountability and operational excellence. The initiatives we have implemented, along with additional initiatives scheduled for implementation throughout 2018, are expected to produce further improvement in our key metrics and provide a strong foundation for us to execute our long-term strategy focused on organic growth, accretive acquisitions, conversion of units to higher levels of care and EBITDAR-enhancing capital expenditures.

By diligently executing this strategy, we expect to increase revenues, reduce operating expenses and increase EBITDAR and CFFO.

I would now like to hand the call over to our Chief Operating Officer, Brett Lee. Following Brett's comments, Carey Hendrickson, our Chief Financial Officer, will discuss our first quarter financial results.

Brett?

Thank you so much, Larry, and good afternoon, everyone. We've discussed in prior earnings calls that Capital Senior Living is in the process of making a fundamental shift in our operating platform from a largely decentralized model with a great deal of local autonomy to a more balanced model that allows for centralization of certain functions to create a better and more consistent level of service for our local operators while still allowing them the degrees of freedom required to understand and react to unique circumstances in each one of their markets. I'm excited to share with you that we continue to make tremendous progress toward this goal.

With every decision we make in terms of rolling out our more centralized operating system, we keep 3 intertwining goals in mind: creating the safest and most welcoming environment possible for our residents; developing the efficiencies and the economies of scale of being a larger company; and removing nonvalue-added tasks from our local operators so that they can have more time in their days to do what they are truly passionate about, which is caring for the seniors that we serve. We celebrated several important milestones on our journey during the first quarter that we will discuss today.

Firstly, Capital Senior Living has worked with our food supplier, US Foods, in their blueprint menu program to implement a new national menu system that went into effect in early April. This system will ensure that every meal planned for our residents is reviewed by a registered dietitian to ensure that we are effectively meeting their nutritional needs. While there will be some regional variations based on the request of our residents, the menu system will create much more standardization of our food offerings across the country to allow for more effective training of our dietary staff, better quality of our meals and reduced cost overall to decrease variation in product selection and food wastage.

In conjunction with the new menu program, Capital Senior Living also implemented a new national procurement platform called DSSI, which we are very excited about. This platform creates a single electronic procurement portal through which all purchasing at Capital communities will eventually flow. This system will allow us to better track spending habits in our properties, guide purchasing habits and enhance utilization of GPO contracts to drive down overall costs. We went live with this program in the first quarter using US Foods as our first vendor and we're able to set up a more restricted purchasing formulary that only allows our end users to purchase the food products that are driven by the new national menu system or on our GPO contracts and have been reviewed by our food experts as being of appropriate quality for our residents. We are now in the process of optimizing our purchasing formulary for nonfood items and will incorporate this spending into our DSSI platform in early May.

Vendors also submit their invoicing directly into the DSSI system electronically, which will greatly reduce our AP cycle, allow us to centralize the AP function at the home office for most purchasing and put us in a position to better take advantage of prompt pay discounts and rebates offered by many of our vendors. Most importantly, this platform streamlines the purchasing process significantly by creating an intuitive picklist of items and gets our end users out of the business of shuffling paper invoices at the local level, which will give them time back in their days to enhance the care environment for our residents.

We continue our process of evaluating opportunities to optimize our fixed cost spend across the company as well through our partnership with SIB and we finalized renegotiations of elevator maintenance, pest control and waste management contracts to shift from local agreements to regional and national agreements in the first quarter. We are now finalizing our review of telecommunications, Internet, cable and utilities contracts and expect that significant economies of scale will be achieved in 2018 and beyond through aggregating this spend more effectively.

I am happy to report that the standard staffing grids that were implemented late last year have greatly assisted the local operators in effectively flexing their staff to a level that is commensurate with current occupancy and our contract labor reduction has also been maintained.

We finalized an agreement in the first quarter with a national staffing supplier named Vizient, which will help us to achieve consistently lower rates for contract labor in those rare instances in which we have no alternatives to short-term contract staffing. We are very proud of our progress in rebasing the expenses of our company into a much leaner and more efficient operating model, but our most important obligation remains to provide the highest quality care possible to the residents we serve. To that end, we have now fully implemented our lean daily management program across the company to drive continuous improvement in core quality metrics. This process is a foundational element of the new capital operating system and involves a daily safety huddle held every morning in each of our communities to discuss leading indicators of residents' safety such as staffing levels, perform an in-depth review on any recent safety events and focus the entire leadership team on their role in implementing process changes to enhance the overall safety and well-being of our residents.

We have also begun incorporating the results of our internal quality assurance audits to help set lean daily management goals for the facility leadership.

We also recognize that our residents have placed the unique trust in us when they chose to live in the Capital community, and we are dedicated to create a vibrant and supportive home environment for our seniors. We celebrated the initiation of 2 cultural programs in the first quarter that we feel will engage our residents in new and exciting ways. The first program is a national partnership with an organization called Music Together, which will offer intergenerational music education classes in our communities and allow our residents to connect with local children and reconnect to their own youth through the power of music. We also understand that our residents are often extremely active in fundraising and philanthropy before they move into our communities and we wanted to create opportunities for our residents to continue their philanthropic efforts as part of the Capital Senior Living family.

To that end, we initiated a national day of service to correspond with the Alzheimer's Association's Longest Day fundraising campaign. Residents in each of our communities will have the opportunity to participate in engaging events to help raise funds for Alzheimer's research, a cause that is near to the hearts of many of us and those that we serve. We believe that this philosophy of providing high-quality care, comprehensive services and unique cultural events will serve as a key differentiating factor for Capital Senior Living going forward.

Capital Senior Living is also investing in our sales organization to fuel occupancy growth. Our 2-pronged strategy involves optimizing our traditional sales cycle through evidence-based sales training in a metric-driven accountability of our field-based sales force and simultaneously seeking new and innovative ways to diversify our referral streams going forward.

Affiliations with health care systems and providers will be an important component of our diversification strategy, and we continue to make progress with several health care systems in our markets around our role in their broader ACO infrastructure. I am pleased to welcome John Klitsch as our new Vice President of Sales and Business Development, and his strong sales background coupled with acute care expense in building ACOs and other innovative partnership models with physicians will be instrumental in helping us to finalize these affiliations in the coming months.

While the high attrition we experienced in the first quarter presented a significant operational challenge, I am incredibly proud of how our staff and leadership responded by keeping expenses in line with occupancy. This represents an emerging maturity of our field-based leadership to recognize and react appropriately to changing market conditions to preserve margins in light of fluctuating volumes. Our recent attrition also represents a significant opportunity for our staff to redouble our efforts and keep our residents healthy and vibrant through continuing to enhance the quality of care at our communities, and this will be our focus throughout the remainder of the year.

It is now my pleasure to hand off the call to our Chief Financial Officer, Mr. Carey Hendrickson, to review our financial results from the first quarter. Carey?

Thank you, Brett, and good afternoon, everyone. The broad-based improvements that have been implemented across our operating platform beginning in 2017 and continuing into 2018 and our focused execution on these initiatives are translating into consistent year-over-year growth in same-community revenue and net operating income. As Larry noted earlier, we've now achieved growth in same-community net operating income for 7 consecutive months, including each month in the first quarter, which is historically the most challenging quarter of the year.

Our financial occupancy declined in line with our expectations in the first quarter, and with lower-than-anticipated expenses, our CFFO exceeded our internal projections. And the results I'll discuss in the remainder of my comments and as we noted in the press release, the company's non-GAAP measures exclude 2 communities that are undergoing lease-up of higher licensed units or significant renovation and conversion. The non-GAAP measures continue to include the 2 Houston communities impacted by Hurricane Harvey since our business interruption insurance restores their economic loss. However, the company's statistical measures, as shown on the last page of the earnings release, exclude the results of the 2 Houston communities since they currently have no residents or revenue and to include them would make the statistical measures less meaningful.

The company reported total consolidated revenue of $114.5 million for the first quarter of 2018, which was a decrease of $1.3 million over the first quarter of 2017, due to lost revenue associated with the 2 Houston communities impacted by Hurricane Harvey. Revenue for those 2 communities in the Houston area was $2.4 million in the first quarter of 2017.

Operating expenses decreased $1.1 million in the first quarter of 2018 to $71.7 million. Operating expenses in the first quarter of this year included a $1.6 million business interruption insurance credit related to our 2 Houston communities impacted by Hurricane Harvey. The intent of the BI adjustment is to recover our lost revenue and any continuing expenses that we have with the goal to restore the average net operating income we had at these 2 communities prior to the hurricane. The BI coverage will continue for 12 months after we complete the restoration of our communities and receive state and local approvals for occupancy or until we reach our previous level of revenue from these communities, whichever comes first. Remediation of those 2 communities is nearing completion. We expect to begin admitting residents at one of the communities in early May and at the other community by the end of May.

Our general and administrative expenses for the first quarter of 2018 were $6 million compared to $6.2 million in the first quarter of 2017. Excluding transaction costs from both years, our G&A expense increased $200,000 in the first quarter as compared to the first quarter of 2017. G&A expense as a percentage of revenue under management was 5.1% in the first quarter of 2018 compared to 4.9% in the first quarter of last year.

Adjusted EBITDAR was $37.9 million in the first quarter of 2018 compared to the $37.7 million in the first quarter of 2017. Adjusted CFFO was $10.4 million in the first quarter of 2018, which, as I noted earlier, exceeded our expectations coming into the quarter. This compares to $11 million in the first quarter of last year.

Same-community revenue increased $1.1 million or 1% over the first quarter of the prior year. Our same-community occupancy was 86.1% in the first quarter, a decrease of 100 basis points from the fourth quarter and a decrease of 130 basis points from the first quarter of last year.

Our same-community average monthly rent increased 1.7% from the first quarter of last year.

Same-community operating expenses increased only $400,000 or 1% versus the first quarter of last year. Our employee labor cost increased only 1.3% in the first quarter of '18 -- 2018. Excluding communities with conversions of units to higher levels of care, our employee labor cost increased only 0.5%. Our food cost decreased 4.4% in the first quarter while our utilities increased 8.3% over the first quarter of 2017 due to the long and colder-than-usual winter weather. If utilities had increased at a more normal rate, our CFFO would have been about $0.01 higher on a per share basis.

With excellent management of our expenses by our ops team, our same-community NOI increased approximately 1% in the first quarter of 2018 as compared to the first quarter of 2017. Contracted labor costs, which were higher-than-usual in the first 3 quarters of 2017 before returning to more historical normalized levels in the fourth quarter, actually decreased 16.1% year-over-year in the first quarter of 2018.

Looking briefly at the balance sheet. We ended the quarter with $23.3 million of cash and cash equivalents including restricted cash. During the first quarter, we've spent $5.6 million on capital expenditures, $1.2 million of which was for recurring CapEx.

Our mortgage debt balance at March 31 was $958.8 million at a weighted average interest rate of approximately 4.7%. At March 31, all of our debt was at fixed interest rates except for 2 bridge loans that totaled approximately $76.4 million. The average duration of our debt is approximately 6.1 years with 92% of our debt maturing in 2021 and after.

As Brett noted in his remarks, we're making very good progress on our 2018 cost initiatives that will begin to have some impact in the second quarter and will have greater impact in the third and fourth quarters. We successfully launched our front-end procurement system with DSSI on April 1. Food is the category we've moved to this system first and it's a cost category with the greatest savings potential. We'll begin adding additional cost categories in early May, as Brett noted. This system will move us to electronic processing of invoices that will greatly improve our workflow, allowing for the centralization of certain accounts payable functions. Importantly, it will reduce the administrative burden on our community personnel so that they can concentrate on taking care of residents and other duties directly related to the success of their communities.

And as Brett also noted, we've negotiated national contracts for several cost categories, with more to come. With our first quarter CFFO approximately $0.01 ahead of our internal expectations coming into the quarter and our initiatives for the remainder of the year progressing as expected, we reaffirm our full year guidance for 2018 of CFFO growth in the range of 4% to 6.5% before acquisitions for full year 2018 as compared to 2017, with same-community NOI growth in the 2% to 4% range for full year 2018. If one were to calculate our 2018 CFFO range on a per-share basis, it would translate into a range of $1.62 to $1.66 per share before acquisitions for full year 2018.

As a reminder, we're not providing quarterly guidance in 2018. But as we look to the second quarter, we expect second quarter CFFO to increase sequentially over the first quarter. As we've noted, our occupancy declined in line with our expectations in the first quarter, which puts us in a considerably better position from an occupancy standpoint and at this time in any of the last 3 years. We expect our financial occupancy to stabilize in the second quarter before beginning to grow at a greater rate in the third quarter. Also, we expect our rate growth to accelerate in the second quarter and continue through the remainder of the year.

The second quarter is typically the quarter with the mildest weather and lowest utilities, with second quarter utilities generally approximately $1 million lower than the first quarter. However, the second quarter has one additional day compared to the first quarter and each additional day in a quarter represents approximately $600,000 of additional expense due mostly to the additional labor for hourly workers and additional food cost.

We currently expect our expense initiative, most notably the front-end DSSI procurement system and the nationalization of contracts, to reduce second quarter expenses by approximately $250,000, with greater impact in both the third and fourth quarters of the year perhaps as much as $500,000 to $750,000 per quarter.

We expect our labor cost to increase at a continued moderate level to the remainder of 2018, increasing approximately 2% to 2.5% year-over-year in the remaining quarters of 2018.

As we noted on our fourth quarter and year-end call, we expect our G&A to increase in 2018 for some important investments in people, as Larry described, primarily in the operations team and in systems. We currently expect G&A to be approximately $6 million before transaction and conversion cost in the remaining quarters of 2018. These G&A initiatives are expected to result in improved financial results that exceed the additional cost.

We believe the successful execution of our clear and differentiated real estate strategy will result in outstanding growth in our key metrics over time and positions as well to create long-term shareholder value as the larger company with scale, competitive advantages and a substantially all private-pay business model in a highly fragmented industry that benefits from long-term demographics, need-driven demand, limited competitive new supply in our local markets, a strong housing market and a growing economy.

That includes (sic) [concludes] our formal remarks and we would now like to open the call for questions.

(Operator Instructions) We'll take our first question from Chad Vanacore with Stifel.

So just looks like occupancy to me, looks like it took a sequential beating, pretty heavy, starting in the first quarter. Starting hat far in the hole in the first quarter, how do you bridge back to higher occupancy by the end of 2018?

Chad, this is Brett. We have a multi-pronged strategy to continue to grow occupancy, first of which, in addition to adding John Klitsch as our Vice President of Sales and Business Development, we have now created a new organizational structure within our sales and marketing structure to essentially separate the responsibilities with a Senior Director of Sales that reports to John and a Senior Director of Marketing that reports up to me. The focus of our field-based sales force now is training them on an evidence-based sales cycle so that they understand each key component of the sales cycle in making an emotional sale. We have a national sales training platform that we've rolled out and now continue to optimize. We're doing very focused secret shopping to get feedback about where we can enhance that sales cycle. And then we are also, on the marketing side, focused on differentiating our marketing strategy through greater use of electronic marketing tactics, social media marketing, which is something that we've piloted over the last couple of months in our red zone properties that are -- those that are most struggling with occupancy, and we've gotten some really good results in driving new leads to our properties. We're also doing some innovative things in terms of utilization of our centralized call center, having leads go directly from our third-party aggregators, such as A Place for Mom, into the call center so that we have more rapid turnaround and that those get handed off as warm lead to our communities in a more rapid fashion. And we're also using the call center to do some mining of our old leads. So everyone's on a little bit of a different decision-making cycle, some may take longer. And so those leads that are more than 90 days' old get continuously mined by our call center so that we can continue to have a touch point with those individuals. And we've seen some nice early results from that as well. So we're looking to optimize our current revenue and sales cycle while we're still looking to diversify into some new ways to grow our market share, and that's really where some of these innovative health care partnerships start coming into play. And we're making tremendous progress in some of the dialogues that we're having from an accountable care standpoint as well. And I think Larry had something to say.

I'd also like to comment, as I said in my remarks, we had the best first quarter in number of move-ins in the history of the company despite probably the worst flu season we've experienced at least a decade and pretty bad weather in parts of the country throughout the quarter. To give you some perspective, our move-ins in the first quarter were 14% higher than last year and 10% higher than the last 3 years. We lost occupancy because our attrition was higher. We had a very -- also our largest number of move-outs in a very, very bad winter with a lot of deaths. So I'm extremely encouraged that, in light of all of the commentary we hear from our peers on the calls, looking at NIC data, the demand is growing, and more importantly, on the front door, we're seeing significant improvement in actual move-ins. With attrition typically coming down through better months, better weather throughout some seasonality and that we will continue at this pace, we will have gains in occupancy for 2018.

All right. So thinking about that, you had good move-ins but you had even higher attrition in the first quarter. Second quarter, the expectation is that occupancy is generally flat, and then -- we the start to grow in the third quarter. Is that -- am I thinking about that the right way?

Yes. That's -- the general trend, Chad, is to kind of stabilize in the second quarter and then begin to grow in the third quarter. That's right. That's the greatest...

Even with prolonged long flu season, should we expect occupancy to continue to decline sequentially in the second quarter? What am I missing there?

I think it's going to depend on how much it picks up in May and June, Chad, because that's really the key. But we expect to stabilize out at some point in the second quarter and then begin to grow in the third.

We did see about a 50 basis improvement in financial occupancy in March, Chad, over February. Another aspect that's very important, this flu season came early. Last year's flu was late. It impacted into the second quarter. If you go back to 2015, which is more analogous, we actually had growth in the second quarter. We're expecting flat this quarter. But I do think the timing of the flu is relevant as it relates -- the move-outs really started to accelerate in December. And again, financially, they come down in the second -- next month. But the fact we did have gains in occupancy in March gives us some hope that we will flatten out for this quarter.

And Chad, as we noted, it was -- it did decrease at levels that we expected in the first quarter and because of that we continue to project our full year revenue growth in the 2% to 3% range and our net operating income growth in the 2% to 4% range and CFFO at $0.04 to $0.06 for all the...

How many units will be better on loss of occupancy than you projected for the quarter?

We were about 20 better than we projected for the quarter.

(Operator Instructions) We'll take our next question from Joanna Gajuk with Bank of America.

So just to confirm, so when you talk about the Q1 performance when you said it exceeded expectations on the CFFO metric, so sounds like it's -- I mean, I guess, Carey just mentioned maybe occupancy was slightly better, but it's mostly the cost, right, that came in so much better than expected.

That is right. Even with utilities coming in high, our expenses were considerably better. Labor and food were both lower than expected, more than offsetting those higher utilities. Our contracted labor costs were also lower than we expected coming into the quarter. And then some of the other smaller categories, just we -- we were conservative in our projection of expenses and they came in better than what we projected.

Great. And then -- so when you talk about these cost savings for the coming quarters, the $500,000 to $750,000 per quarter, I guess that's second half of the year savings. So that only reflects the currently running or to-be-launched programs, right, because then you also mentioned at some point that you see there could be some additional initiatives. So that's pretty much those savings, the $500,000 to $750,000, that's the savings on what you kind of already implemented so far.

Yes. Based on our projection -- our current projection of what we'd expect both from the food and adding some of these other categories in to the DSSI front-end procurement platform for the rest of the year, as well as continuing this work on the nationalization and regionalization of contracts. So it's kind of a projection of all that, Joanna. And that's our current estimate. We won't know exactly the impact of that until we finish some of this work. But we feel comfortable in saying that, that's the level of expense savings we'll get from those particular initiatives.

And that's obviously included in your same-store NOI projection for the year, right?

Yes, that is included in that same-store NOI. Yes, it is.

And then, I guess, so you're talking about sort of the full year guidance in terms of the organic growth, but previously you mentioned your plans to come back to the acquisition market. So any flavor there in terms of what should we expect and when should we expect it, any trends in terms of valuation, and also at the same time, what do you think sort of the financing cost would be when you're doing the next deal?

Yes. Joanna, it's Larry. We are back looking at properties, looking at acquisition opportunities. We've actually created some very interesting filters of what we're looking for based on kind of our experience with our portfolio and other acquisitions. As I said, we're not going to guide to acquisitions, but we would expect that we will start to see acquisitions throughout the second half of the year, growing more next year. Financing today, the -- with the 10-year where it is, close to 3%, we'll probably be in the low 5s. Again, if you look, it's still lower than where it was in some of our acquisitions a couple of -- about 3, 4 years ago. In fact, we're actually looking at doing some refinancing now to take some of those loans back down to lower interest rates from what we borrowed at, which is closer to mid-5s a few years ago, 4, 5 years ago. So we think that the market is still attractive for acquisitions. We feel that the one thing that's very important, as you know, when we made acquisitions previously, our culture and operating platform was much more decentralized. So we bought buildings, we really continued to run them the way the former owner did. We've put our insurance programs, we've put in our GPO for food, but that was pretty much the limit. We did our policy procedures and training. If you look at how robust the initiatives are that are going to be rolled out this year across the full expense item -- area, we should get further economies immediately on those acquisitions, which we didn't necessarily receive in our past experience.

Great, it's good color. And also another, I guess, related topic. Because I guess, the latest sort of semi-acquisition transaction you've done, and what's the buyback of your leases from your landlord? So any plans on that front in terms of sort of lower risk improvement in cash flows by doing that?

We are working with our landlords on a multi-tier strategy to reduce our lease exposure, improve our balance sheet and improve our portfolio's performance. We were successful in buying 4 properties back from Ventas in the first quarter of last year. We are looking also at disposing of a few properties with some landlords, properties where markets may have turned, but we feel that is a good time to sell some noncore assets and eliminate those from our lease, which will improve our coverages and our cash flows. And we'll continue to have a very good discussion with other landlords of ways that we can restructure, which could include buying back, or other ways to restructure our leases to continue to reduce our lease exposure and increase the percentage of our ownership as it relates to our total portfolio.

So is there something more immediate that we could expect within the next, call it, 12 months? Or it's still kind of early to talk about that?

I think over the next 12 months, we'll have more to discuss.

(Operator Instructions) And it appears there are no further questions at this time. I'd like to turn the conference call back over to Larry for any additional or closing comments.

Thank you very much for your participation and support. As always, feel free to contact Carey or myself if you have any further questions.

We also look forward to seeing a number of you at upcoming conferences over the next month or 2, and we wish you a very good evening. Thank you very much.

And once again, that concludes today's conference call. We thank you all for your participation and you may now disconnect.